Canada's Condominium Magazine
Does this sound familiar? The costs of land and materials are rising, and there are not enough finished lots in the neighborhoods where people want to live. Builders are “hamstrung” by regulations that cost them up to a quarter of the price of a new home. A “huge” labour shortage makes it harder to find workers to build homes. And by building fewer homes when demand is so high and supply so low, builders can demand a higher price for each home. The lack of supply of affordable homes is particularly difficult for first-time buyers.
That is a summary of the US new homes market as given by CNBC a few days ago. It goes on to say that despite low building intentions, builder confidence is at record high levels, thanks to “Trumponomics.” Builders apparently believe that Trump will lighten their regulatory burden.
Except for the Trump factor, the situation in the Toronto area is remarkably similar. In its monthly summary of new housing activity in the GTA, the Building Industry and Land Development Association (BILD) leads with a statement about how the lack of new housing supply has driven prices to “unprecedented” levels. Housing supply has “plummeted” from 31,150 new homes available in 2006 to just 15,184 today. Of that available inventory, just 13 per cent were low-rise homes, and of those just 789 were single-detached homes.
High-rise inventory has also been on a downward path, according to the BILD statement, for the past three years. The 13,148 condo units available for sale in November represented the lowest level in that category in November since the year 2000.
As a result, prices have risen to new record levels. The average price of a new condo reached $493,137, 10 per cent higher than a year ago. New detached homes shot up 27 per cent, reaching $1,230,961 in November. That is a year-to-date increase of $258,000. The aggregate low-rise price, including semi-detached and townhomes, was up 20 per cent, hitting just under a million dollars.
Low inventory notwithstanding, new condo sales to date in the GTA are at 26,299, up 24 per cent over the previous year and up 35 per cent over the ten-year average. New low-rise sales are also up 8 per cent compared to the ten-year average. Total new home sales for 2016 to date stood at 43,651, higher than at the same time in 2015, and 23 per cent higher than the ten-year average.
According to BILD, the industry is “building to government policy,” and that means fewer low-rise homes, especially of the single-family type. Demand for that type of home, however, has not dropped, accounting for the surging prices.
In the City of Toronto, new high-rise sales in November outnumbered low-rise by about thirty to one (2,030 to 70). The spread was less dramatic in the GTA, where high-rise sales came to 2,647 compared to 1,570 low-rise.